Financials

Income you earn can be taxed as either ordinary income or capital gains. Ordinary income is income you earn from your business or job. Most people declare ordinary income on their taxes. The tax treatment of ordinary income is less favorable than capital gains. On the other hand when you sell a capital asset, that asset is subject to capital gains tax. You receive capital gains from the sale of

There are rules that limit the amount of losses you can take from your s corporation schedule K-1. Shareholders must be aware of these 3 limitations: Basis limitation At risk rules Passive activity loss rules Basis limitation What is basis? Basis is a measure of a shareholders investment in the business. Basis is not difficult to compute if done on a regular basis. Basis should be computed when, the business experiences

    S Corporations provide the benefits of having a corporation while being taxed as a partnership. S Corporations are treated as corporations under state law and provide the same legal protection as C corporations. The income and deductions of an S corporation flows through to the individual tax return. Income is taxed at the shareholder level and not the corporate level. When to elect S corporation status When shareholders

As a self-employed individual you should try to collect due payments as soon as possible. Waiting too late to collect a debt, increases the chance of not being able to collect on it. It also disrupts your cash flow which can be used in other areas of your business. Ways to collect from customers quickly Have a collection policy You should have a collection policy included in your client agreement.

One of the questions a business owner will need to answer is if to keep his/her books using cash or accrual accounting. Before I talk about cash and accrual accounting you should understand the difference between accounting events and accounting transactions. Accounting events An event is a transaction that changes a business financial statement. An event causes a change in either the assets, liabilities or equity section of the